Signs of growth in U.S. beef production despite downward price pressure

Average U.S. beef production in the 12 months through May was up 0.9 percent compared with last year and up for the ninth consecutive month. Production over the last three months is up 4 percent and the growth rate has been generally rising since June 2015. This suggests upward momentum will persist for this industry into at least late 2016. Signs of industry growth are building and suggest production is likely to rise on a year-over-year basis in 2016 for the first time since 2011.

The leading indicators for this industry suggest beef production could rise through mid-2017 despite the current downward pressure on prices at the supermarket and the stockyard. Live cattle cash prices in July were down 22.1 percent compared with July 2015. Monthly cattle prices are down to the lowest level in nearly five years, driven by cheaper input costs (corn prices down 9.8 percent from July 2015). The U.S. Beef Consumer Price Index is down 6.7 percent from this time last year and internal trends suggest deflation will become more severe into at least late 2016. But U.S. personal consumption expenditures on beef and veal products have been rising throughout 2016, even as prices are below the year-earlier level. NP